Search
About Us
We’re one of 12 regional Federal Reserve Banks working together with the Board of Governors to support a healthy economy. Our job is to serve the American public — to serve you. And our mission is to foster economic stability and strength.

Learn more about our bank >
Economic Research
We conduct research to support policymaking and thought leadership on issues important to the Federal Reserve and the Fifth District. We also inform the public through our data and economic analysis, publications, presentations and educational resources.

Learn more about Economic Research >
- Events
- Contacts
Banking & Supervision
We help ensure our financial system is operating safely and effectively, and we help support secure and efficient methods to transfer your funds through our financial system.
Education
We work with teachers, students and the public to enhance understanding of economics, personal finance and the Federal Reserve.

Learn more about resources, museum visits & educational programs >
- Resources & Programs
- Field Trips & Classroom Visits
- Events
- Contacts
Community Development
We work with community partners to identify and address economic challenges and opportunities in low- and moderate-income communities in the Fifth District.

Lubik-Matthes Natural Rate of Interest

+ Share

twitter

facebook

The natural rate of interest is a hypothetical interest rate that is consistent with economic and price stability. There are various estimates of the natural rate in the economics literature, each making certain assumptions about economic interactions. Richmond Fed economists Thomas Lubik and Christian Matthes have devised one such estimate: the Lubik-Matthes Natural Rate of Interest. It is computed using a more flexible economic framework than other popular methods. Their estimate will be updated quarterly.

Latest Reading

The median estimate for the Lubik-Matthes Natural Rate of Interest was 1.19 percent as of the third quarter of 2018.

Date,Lower Bound,Median Estimate,Upper Bound
12/31/1966,-0.892969389,1.481535002,3.626157565
3/31/1967,-0.173604923,1.550950144,3.115177289
6/30/1967,-0.19931315,1.528165449,3.057646962
9/30/1967,-0.643551093,1.473361868,3.329654504
12/31/1967,-0.890528565,1.455331585,3.552508053
3/31/1968,-0.961499042,1.460475524,3.736876055
6/30/1968,-1.015377005,1.458740225,3.927033317
9/30/1968,-0.70458445,1.463670274,3.589528072
12/31/1968,-0.623388197,1.481346761,3.578190399
3/31/1969,-0.549648565,1.537048927,3.768023743
6/30/1969,-0.86981081,1.507736434,4.052989861
9/30/1969,-0.73312278,1.501690038,3.863953675
12/31/1969,-0.706336191,1.465220944,3.628108019
3/31/1970,-0.564478715,1.472330362,3.494255692
6/30/1970,-0.559597443,1.459068749,3.41849387
9/30/1970,-0.500319446,1.45151864,3.286016255
12/31/1970,-0.839298804,1.391549327,3.298740253
3/31/1971,-0.497330324,1.463752188,3.165847124
6/30/1971,-0.602300896,1.438580657,3.33559178
9/30/1971,-0.482137547,1.460914696,3.325669897
12/31/1971,0.001769316,1.533352812,2.987908959
3/31/1972,-0.172621775,1.50032451,3.036711194
6/30/1972,-0.444591191,1.466209554,3.284507118
9/30/1972,-0.494848,1.440732404,3.241103315
12/31/1972,-0.480700725,1.431869864,3.181562171
3/31/1973,-1.106702469,1.329771535,3.485646352
6/30/1973,-2.243339059,1.098823618,3.823229455
9/30/1973,-3.389334978,0.911918004,4.20904145
12/31/1973,-2.642793405,0.950153657,3.695009107
3/31/1974,-3.269163611,0.780430227,3.5997922
6/30/1974,-6.025740128,0.260256114,4.395000718
9/30/1974,-6.05104475,0.180364362,4.352233393
12/31/1974,-3.153709079,0.729242644,3.522344021
3/31/1975,-1.637940995,1.073448754,3.061442489
6/30/1975,-1.127126979,1.137348214,3.103127451
9/30/1975,-1.409770268,1.053293439,3.423696296
12/31/1975,-1.452274558,1.044352977,3.357736219
3/31/1976,-1.386053565,1.063870829,3.377556236
6/30/1976,-1.245287631,1.091595325,3.289552251
9/30/1976,-1.941549513,0.969749989,3.478965906
12/31/1976,-2.0286593,0.979702703,3.618504573
3/31/1977,-2.020306942,1.034473588,3.8428501
6/30/1977,-1.571223402,1.173606158,4.017565873
9/30/1977,-1.683882579,1.206863562,4.358129171
12/31/1977,-1.413101647,1.297390905,4.349576068
3/31/1978,-1.324044986,1.407802287,4.620931372
6/30/1978,-1.384448777,1.557748747,5.329864348
9/30/1978,-1.42260214,1.584392931,5.482844494
12/31/1978,-1.466035559,1.646377814,5.780921728
3/31/1979,-0.89102068,1.728641156,5.212340834
6/30/1979,-1.594689586,1.695358246,5.979520642
9/30/1979,-1.284407093,1.825185618,6.10413947
12/31/1979,-1.536766473,1.922751638,6.868245192
3/31/1980,-1.610245396,1.964606321,7.046507752
6/30/1980,-0.842877051,2.006079226,5.977277664
9/30/1980,-0.217256709,2.14237355,5.472594765
12/31/1980,-0.465084777,2.701855647,8.40990454
3/31/1981,0.150749627,2.731016426,7.481560974
6/30/1981,0.453645686,2.778470707,7.178063909
9/30/1981,0.698386754,2.824378416,6.91112184
12/31/1981,0.813771699,2.590795021,5.486621276
3/31/1982,0.946556643,2.815982266,6.321562385
6/30/1982,1.143455153,2.911543143,6.362061352
9/30/1982,1.124311733,2.715358293,5.299284147
12/31/1982,1.254866424,2.833721223,5.533885734
3/31/1983,1.383621443,2.948816837,5.737533701
6/30/1983,1.540924213,3.000897614,5.710400641
9/30/1983,1.571526753,3.268137824,6.912733889
12/31/1983,1.614542257,3.189751289,6.484146159
3/31/1984,1.644577633,3.218367854,6.545194055
6/30/1984,1.652126582,3.304425507,6.980060484
9/30/1984,1.689227739,3.377652337,7.282474823
12/31/1984,1.516932257,2.888740021,5.218692134
3/31/1985,1.546544459,3.071994969,5.914876427
6/30/1985,1.584396748,3.024492998,5.657254102
9/30/1985,1.601438425,3.020961327,5.552864948
12/31/1985,1.581478335,2.921702895,5.159891444
3/31/1986,1.55420517,2.950447059,5.346712734
6/30/1986,1.45143483,2.737350988,4.594357371
9/30/1986,1.451415388,2.699367384,4.418277441
12/31/1986,1.447812553,2.728694673,4.590512434
3/31/1987,1.486812243,2.74273783,4.625300561
6/30/1987,1.455249968,2.79233463,4.908387322
9/30/1987,1.426857789,2.770253752,4.904650346
12/31/1987,1.413149859,2.781653543,5.00250552
3/31/1988,1.321403311,2.653193544,4.623199812
6/30/1988,1.386067568,2.7856644,5.167344643
9/30/1988,1.428561974,2.805417014,5.181888486
12/31/1988,1.472318699,2.803692283,5.071979719
3/31/1989,1.493322296,2.813385427,5.095694136
6/30/1989,1.443681565,2.693190198,4.668545547
9/30/1989,1.30507787,2.485848568,4.025248876
12/31/1989,1.126428341,2.354126478,3.812803572
3/31/1990,0.973566322,2.270504639,3.795560079
6/30/1990,0.842064937,2.160229279,3.615085897
9/30/1990,0.726195873,2.039646115,3.356135217
12/31/1990,0.630914782,1.940698227,3.145227775
3/31/1991,0.56214293,1.874186329,3.001139474
6/30/1991,0.744550517,1.954696894,3.110220671
9/30/1991,0.71872198,1.949341946,3.142164191
12/31/1991,0.629440248,1.880313691,2.991599538
3/31/1992,0.659819214,1.896576412,3.005477725
6/30/1992,0.708716395,1.922693623,3.049417547
9/30/1992,0.676047739,1.898445915,3.008788437
12/31/1992,0.662482758,1.906039518,3.04497477
3/31/1993,0.653287107,1.915056325,3.08071787
6/30/1993,0.656089382,1.937595186,3.110845815
9/30/1993,0.733702267,1.988226956,3.165597927
12/31/1993,0.854081023,2.07512578,3.291990307
3/31/1994,0.949855882,2.163439177,3.471542306
6/30/1994,1.1409684,2.37654976,4.05787374
9/30/1994,1.124542258,2.399557245,4.099133789
12/31/1994,1.22516525,2.545499764,4.543700387
3/31/1995,1.209870438,2.572542313,4.635873558
6/30/1995,1.196626753,2.595066961,4.709120123
9/30/1995,1.163971208,2.573920616,4.508422134
12/31/1995,1.165564,2.611085252,4.597101399
3/31/1996,1.070609073,2.573091776,4.477700794
6/30/1996,1.244815973,2.773380619,5.100635429
9/30/1996,1.213317835,2.780006193,5.204170637
12/31/1996,1.16099083,2.770738151,5.244613601
3/31/1997,1.098343603,2.748507916,5.225481092
6/30/1997,1.286508127,3.008488918,6.254531358
9/30/1997,1.224432792,2.960927225,6.14228013
12/31/1997,1.149910489,2.909785521,6.036615264
3/31/1998,1.114665288,2.893117377,6.039582421
6/30/1998,1.133764151,2.929194911,6.268629493
9/30/1998,1.054055205,2.845573287,5.999713678
12/31/1998,0.745335331,2.530215143,4.883674915
3/31/1999,0.788480772,2.52934682,4.963276923
6/30/1999,0.752165251,2.489345926,4.958479533
9/30/1999,0.919951064,2.675735196,5.709111692
12/31/1999,0.891727825,2.649704668,5.693133339
3/31/2000,0.742641144,2.516947143,5.445711091
6/30/2000,0.879863052,2.732331655,6.369470293
9/30/2000,0.645260423,2.415550565,5.412043933
12/31/2000,0.529235375,2.29209242,5.147587084
3/31/2001,0.084519633,1.875131017,3.8951045
6/30/2001,-0.386163016,1.574248571,3.184916811
9/30/2001,-0.489318516,1.486308775,3.076614224
12/31/2001,-1.410212841,1.163805157,2.71258517
3/31/2002,-0.448163683,1.447677819,3.039468099
6/30/2002,-0.558058478,1.407275615,3.04173556
9/30/2002,-0.780577272,1.310767408,2.927609756
12/31/2002,-0.894527745,1.23688736,2.822020248
3/31/2003,-0.858750828,1.224893627,2.780637595
6/30/2003,-0.329526494,1.419561402,3.049520762
9/30/2003,-0.345027973,1.414429361,3.036393633
12/31/2003,-0.42427291,1.378147628,2.99417105
3/31/2004,-0.932739992,1.201340257,2.796387644
6/30/2004,-0.975728121,1.190121245,2.797312681
9/30/2004,-0.319038052,1.430579314,3.143002398
12/31/2004,-0.20468651,1.500772562,3.309754093
3/31/2005,-0.101451226,1.634213531,3.722307468
6/30/2005,-0.062230704,1.668726645,3.851285255
9/30/2005,0.017472759,1.736792402,4.040194069
12/31/2005,-0.01604989,1.798673995,4.420340743
3/31/2006,0.118704798,2.031265561,5.350892953
6/30/2006,-0.10924898,1.825597715,4.851266443
9/30/2006,-0.226297025,1.768655125,4.787849355
12/31/2006,-0.085547087,1.90576454,5.23329985
3/31/2007,-0.414821128,1.704388211,4.791881585
6/30/2007,-0.23907294,1.911884029,5.680543042
9/30/2007,-0.474762258,1.711216524,5.040555308
12/31/2007,-1.258835167,1.252886043,3.729079492
3/31/2008,-3.591100793,0.527921686,2.45046405
6/30/2008,-4.995790417,0.161595364,2.094524293
9/30/2008,-4.163716953,0.339743217,2.371245719
12/31/2008,-9.474167003,-0.796742121,1.591729464
3/31/2009,-6.445934642,-0.253489298,1.896360885
6/30/2009,-4.726660476,0.059812556,2.12543584
9/30/2009,-3.418556811,0.307214795,2.317330463
12/31/2009,-4.349718369,0.016849953,2.0177509
3/31/2010,-4.353813588,-0.062982556,1.929019256
6/30/2010,-3.006119687,0.264795707,2.265287437
9/30/2010,-3.033566003,0.229389423,2.210176326
12/31/2010,-2.642324091,0.376356457,2.451270659
3/31/2011,-4.377629345,-0.136792539,1.911302226
6/30/2011,-4.312468335,-0.155588586,1.907712904
9/30/2011,-4.89693269,-0.394845489,1.678652784
12/31/2011,-3.697334542,-0.106880716,1.895647902
3/31/2012,-3.759564685,-0.130848672,1.957016466
6/30/2012,-3.399659634,-0.044018203,2.030819842
9/30/2012,-3.810532267,-0.214306005,1.803493617
12/31/2012,-4.15550369,-0.321555873,1.702621103
3/31/2013,-2.506854631,0.210445573,2.228721263
6/30/2013,-3.177392795,-0.049224107,1.89587183
9/30/2013,-3.200323824,-0.060166018,1.865604348
12/31/2013,-2.756225121,0.092193845,2.087464134
3/31/2014,-3.341504432,-0.118578147,1.832805765
6/30/2014,-2.694531164,0.118859952,2.049007095
9/30/2014,-2.288906036,0.255821182,2.209397927
12/31/2014,-2.496706373,0.160543103,2.101442076
3/31/2015,-2.559207677,0.145105826,2.037917295
6/30/2015,-2.599840961,0.168241257,2.182449294
9/30/2015,-3.247047383,-0.028242902,1.997197222
12/31/2015,-3.72822828,-0.173518917,1.815709531
3/31/2016,-3.3631326,-0.080450297,1.927768714
6/30/2016,-2.833836337,0.106815373,2.158534572
9/30/2016,-2.935100942,0.086257684,2.085958579
12/31/2016,-2.891038588,0.107420485,2.008080427
3/31/2017,-1.935709088,0.502474738,2.525283748
6/30/2017,-1.199114268,0.875462658,3.104989797
9/30/2017,-1.035346245,1.009386442,3.323235697
12/31/2017,-1.497783462,0.806861381,2.920035425
3/31/2018,-1.174619074,1.029718596,3.413017374
6/30/2018,-0.935120557,1.193737078,3.685964716
9/30/2018,-0.980315432,1.193564651,3.619107983

The real natural rate of interest was computed using the procedure described in Thomas A. Lubik and Christian Matthes, "Calculating the Natural Rate of Interest: A Comparison of Two Alternative Approaches," Federal Reserve Bank of Richmond Economic Brief 15-10, October 2015. Further discussion of this approach based on time-varying parameter VARs can be found in Thomas A. Lubik and Christian Matthes, "Time-Varying Parameter Vector Autoregressions: Specification, Estimation, and an Application," Federal Reserve Bank of Richmond Economic Quarterly, vol. 101, no. 4, Fourth Quarter 2015, pp. 323-352.

What Does the Natural Rate of Interest Mean?

The real natural rate of interest is a key concept for understanding and interpreting macroeconomic relationships and the effects of monetary policy. Interest rates equal to the natural rate are consistent with price and economic stability. Rates above the natural rate slow economic activity and price growth, while rates below the natural rate are stimulative. In other words, it is not the level of the natural rate that matters but its value relative to other interest rates.

The natural rate of interest is thought to be determined by economic fundamentals such as productivity shocks or changes in consumer's preferences. The challenge is that the natural rate of interest is a hypothetical construct that cannot be measured directly. Instead, economists have developed various empirical methods that attempt to derive the natural rate from actual data. The Lubik-Matthes estimate is one such approach that applies fewer theoretical restrictions than other popular methods, such as the Laubach-Williams and Holston-Laubach-Williams models produced at the Federal Reserve Bank of New York.

Additional Resources

Methodology behind the Lubik-Matthes Natural Rate of Interest (non-technical version)

Downloadable data and additional graphs (XLS)

Suggested Citation

Lubik-Matthes Natural Rate of Interest, Federal Reserve Bank of Richmond, last updated December 17, 2018, https://www.richmondfed.org/research/national_economy_natural_rate_interest.

Contact Us

Thomas A. Lubik (804) 697-8246

Lubik-Matthes Natural Rate of Interest

Additional Resources

phone Contact Us

Contact Us